LIC may hike capital market exposure to ₹4 L cr this fiscal
LIC EARNED ₹3 LAKH CR IN TOTAL PREMIUM INCOME IN 201617, UP FROM ₹2.66 LAKH CR IN THE PREVIOUS YEAR. IT HAS TOTAL ASSETS OF AROUND ₹23 LAKH CR
MUMBAI: Life Insurance Corporation of India (LIC), the country’s biggest institutional investor, plans to spend at least ₹4 lakh crore buying stocks and bonds this financial year, the highest ever in absolute terms, two persons with direct knowledge of the plan said.
The decision to raise its annual investment target by at least ₹50,000 crore from 2016-2017 was taken after a steady surge in the state-owned insurer’s premium income for three consecutive quarters, said the two persons, who didn’t want to be named because LIC’s annual targets are market-sensitive and kept confidential.
An email sent to LIC did not elicit any response.
LIC chalked out its investment plans for the year at a recent meeting of top officials.
“LIC invested at least ₹3.5 lakh crore during the last fiscal, which will be disclosed in LIC’s annual report that will be sent for parliamentary approval in the next few weeks. The annual report of LIC will be put out only after parliamentary approval,” one of the two people cited above said.
The hike in LIC’s investment target is based on the hope that the uptrend in premium collections will continue during the current financial year, this person said.
In the December quarter, LIC collected ₹68,605.8 crore in premiums on a net basis. In the March quarter, the insurer’s net premium collection was ₹99,542.34 crore. In the April-June period, the insurer collected around ₹1.5 lakh crore in net premiums.
Insurers invest money in the capital markets from premium collections and income from other investments.
“If the premium collection trend continues, during this financial year, LIC should be able to increase its first year premium collections by at least 25%,” said the first person.
As the equity market continTech ues to be rising in most trading sessions, LIC is finding fewer opportunities to invest in stocks, said the second person. BSE’s benchmark Sensex has risen 20% this year, making it the secondbest performer in Asia after Hong Kong’s Hang Seng Index. So far this year, foreign and domestic institutional investors have bought $8.56 billion and ₹23,310 crore, respectively, in equities.
The second person said LIC is not taking a contrarian call at the moment. “Unless there are sharp corrections, which is unlikely any time soon, LIC may not invest much in equities. This is also appropriate according to the product strategy of LIC. During the current fiscal, ₹50,000 crore in shares of domestic firms may be invested in the share market.”
Most of the investment by LIC this year will be allocated in fixedincome securities. As per the rules of the insurance regulator, at least 50% of an insurer’s investments are required to be made in government securities.
Any sharp increase in stock investments by LIC or other large investors may raise indices to a level where any adverse event may result in steep losses for investors, said Sudip Bandyopadhyay, CMD of Inditrade Capital.